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The Reverse Merger Process

Prepared April, 2004

The FastestLowest Cost

Highest Valuationand Most Liquid ...

...Process for going public


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Confidential. Not for Public Distribution2

Presentation Liability Statement

Liability Statement: This proposal has been assembled based upon informationprovided by the MacLellan Group, Inc., TriPoint Capital Advisors, LLC and AmaroqCapital, LLC. Significant work product and intellectual property held by these threefirms is disclosed in this presentation and any of their advisors, affiliates,subsidiaries, subcontractors and or its contents are subject to an acknowledgedconfidentiality, nondisclosure and non-circumvention agreement. Any use of the

information enclosed without the written permission of and compensation to theMacLellan Group, Inc., TriPoint Capital Advisors, LLC and Amaroq Capital, LLC. willbe considered a significant breach of this acknowledged confidentiality,nondisclosure and non-circumvention agreement. In the event of a breach, thefirms named above may together or separately seek fines, penalties, damagesremedies and relief in U.S. Federal or state courts where they are organized.


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Why Complete an RTO?

Increase your Companys ability to raise capital

Expands the scope of your Investor base;

Provides a liquidity path for your shareholders and creates the opportunity forgreater diversification of shareholder wealth;

Private equity investors are difficult to attract to the your Company as long as it

is private;

A typical IPO is extremely difficult for smaller companies (under 100M inrevenues);

Typical small-cap IPO cost averages up to US$1-3 million in expenses andprofessional fees, plus commissions on the capital that is raised;

The RTO process for a small-cap company typically runs approximatelyUS$350,000 in fees and expenses, plus approximately 12-15 percent of theshares issued; and


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Market Comparisons

US HK Singapore China

Liquidity $$$$$ $$ $$ $

Valuation 20x - 25x 10x 10x - 12x 25x - 40x

Capital $$$$$ $$ $$ $

Regulatory $$$$ $ $ $

Fees $350-500,000 $1.1m - $1.5m $1.4m $2.2m

Partners $$$$ $$$ $$ $

Transparency $$$$$ $ $$ $

Acquisitions $$$$$ $$ $$ $

Timing $$$$ $$ $$ $


5/28 Confidential. Not for Public Distribution5

Our Reverse Merger Approach

Members of our team have advised and been actively involved in numerousreverse mergers over the past 11 years

Our RTO process relies on a team of professionals possessing the requiredtalents in critical areas of the transaction. These specialized areas include:

Transaction management

Contract & SEC legal work,

Target shell company sourcing,

Investor relations,

Business planning, research

Investment banking / capital raising

We assumes an role on the Board of Directors and actively promotes thestrategic vision of the Company.

We typically focuses on 2-3 transactions per year. One such success in 2003 wasAXM Pharma currently operating with a +100M Market Capitalization.



Professional Advisory Process - A Two-Stage Approach

A more detailed description of our process is outlined in our ProfessionalAdvisory Agreement.

Our aim is to position your Company to raise significant capital at a highvaluation with maximum liquidity.

The costs associated related to our advisory work are spread out over a 6-months and is approximately $250,000.

Stage 1 - Commences immediately following the execution of our Professional Advisory Agreement.During this stage we will work with the Company and its international auditors, construct the dealstructure, begin drafting all relevant documents, conduct due diligence, write the business plan, undertakea preliminary valuation, speak with potential investors.

Stage 2 - We execute the transaction including the share swap agreement and all US SEC filings, thecompletion of private equity or debt financings, the writing of a Research report and the beginning of theInvestor relations program and the eventual listing on a major stock exchange.



Our Reverse Merger Team

Mr. Douglas MacLellan:Team Leader, CEO, of the MacLellan Group,Inc. (Los Angeles)

Mr. Joe Cunningham: Financial Advisor, Origination and Execution Specialist, Business Plan &Research Coordinator, President, Amaroq Capital,LLP (Minneapolis)

Mr. Curtis Hollister: Adviser and Origination specialist - based in Canada.

Mr. Mark Elenowitz: Financial Advisor & Equity Structure, Managing Director, TriPoint Capital Advisors,LLC (NYC)

Mr. Louis Taubman, Esq.: Securities and Exchange Commission (SEC) Lawyer, General Counsel ofTriPoint Capital Advisors, LLC(New York)

Tom Madden: Key Investor Relations Specialist, President, Madden Consulting, LLP (Seattle)

John Steinmetz: Investment Banking, TerraNova Capital Inc., New York

Andre Schwegler: Sales, TerraNova Capital, New York

Charles li: China Attorney, T&C Law Offices, Beijing

Lifeng Zhang: China based transaction specialist



The Five Pillars of a Successful RTO

1). Develop a growth focused Business Plan.- We will assist in the development of the business plan and financial model

2). Ensure profitability is reached in the year preceding the RTO.- It needs to be US GAPP based accounting profit

3). Follow the process outlined of the advisory team.

- We have executed this process many several times before- You are paying us, please listen to our advice- We have worked with many companys in their first overseas venture

4). The Board of Directors and most importantly the CEO must be 100% behind the transaction

- Assign a dedicated Transaction manager with a team he / she can rely upon- The demands on managements time can be intensive

- Document and process control are critical

5). Plan to become one of the leading businesses in your industry

- The RTO will transform your business, be prepared for the changes that willtake place

Our aim is to provide the company with the money it needs to executeits strategy.



Your Companys Reverse Merger Process

Follow our Proven Reverse

Merger Process and together we

will create and enhanced path to

new equity investment. Ourunique process provides a

channel for your Company to

receive a premium valuation on

raising capital, through a tiered

multi-round financing strategy.


10/28Confidential. Not for Public Distribution10

RTO Timetable (Sample Transaction)

W k1 -2 Wk 3-4 Wk5 Wk6 Wk7 Wk8 Month3

Month4

Month5

Month6

Sign Appointment

Letter

Due Diligence

Audit

Draft Agreements

Valuation analysis

Execute Share

Swap Agreements

Begin trading onOTC

Investor RelationsProgram

File with SEC

PrintPPM

Market $ CloseonPIPE Investment

File RegistrationStatement

File with AMEX

Road Show toInvestors

RegistrationStatementApproved

April 2004: Sign Advisory Agreement. Shell Companyreview & negotiations. New Business Plan drafting iscommenced. Auditors are retained & they commence auditprocess.

June 2004: Definitive Agreement between Xian FilmGroup & Shell Company is executed. Audit is completed.Business Plan is Completed. Initial Research Report isdrafted.

July, 2004: The Merger is completed. Drafting of the

Private Placement Memorandum. Initial Research Report ispublished. The Stock starts trading & your Company is apublicly listed company!

August, 2004: PPM is completed & the Offeringcommences.

September, 2004: PPM is closed US$15 million is raised.

October, 2004: SB-2 Registration Statement is drafted andfiled with the SEC and Xian Film Group files for AMEXor NASDAQ listing.

December 2004: SB-2 is approved by the SEC and XFGgains listing on AMEX or NASDAQ .



Potential RTO Structure

Variations of this structure are possible where circumstances permit

OTC

USA China

Chinese

Company

US New

Company

JV

WOFE

Shell

Company

AMEX

Share Swap

Share Swap

Effective ownership



Reverse Merger Process: The Shell

Step One: Locating suitable Shell merger candidate We have many sources for shell companies and can have a transaction ready in a

matter of weeks. Undertake due diligence on the Shell (i.e. SEC filings, audit, legal records)

Step Two: Due Diligence Deal Structuring with your Company Due Diligence: legal records, accounts, articles of incorporation and legal records. Negotiations: Structuring transaction, defining terms and conditions Complete US GAAP Audit of your Company.

Step Three: The Merger The official merger: Share Exchange, Share Purchase and/or Asset Purchase

Agreements, issuance of new shares, etc.

Step Four: Public Company SEC Filings: Form 8K, Form 14C, Form 14F, Form 3 and others as required Maintain SEC Filings: Quarterly and Annual Reports, other filings as required.


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Typical Transaction Overview

Employ our methodology to create a publicly traded company that will facilitateraising capital and will drive higher valuation multiples.

Create new business plan based upon public merger and possible acquisitionstrategy.

Merge your Company with existing Public Company.

Assist with initial SEC filings and corporate compliance requirements.

Deploy comprehensive Investor Relations & Public Relations campaigns in orderto stimulate active trading of the your Company Companys stock.

Raise additional capital through a private placement (typically convertiblepreferred shares) to facilitate the growth and expansion of the business.

Provide initial research coverage & assist with investor relations and supportservices

Apply for a senior listing on the American Stock Exchange (AMEX) or theNASDAQ SC.


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Reverse Merger Highlights

Merger of your Company and the Shell Companywill take approximately 90 days.

New Financing within 180 days.

China Shareholders would own approximately up to80% or more of the Company post merger & pre-financing.

Example

The total share pool would likely be kept atapproximately 15 million shares (post merger &financing) in order to try and maintain a per shareprice US$3.50 or higher.

Based upon existing cash assets and expectedprivate placement the Company would immediatemoved to an Amex or NASDAQ. (ie:4 th Qtr03).

OriginalCompany

Public Shell

Your Company shares are purchased or swappedby the public shell company

Public ShellConvertible

Securities issued

for US$15 million

The ultimate amount of capital raised and the valueof the offering could adjust down the total amount ofdilution, wherein the china shareholders maintain ahigher percentage ownership in the business.

Capitalization:

Industry Valuation18 X 2004P/E.

Stock issued to Investors @ a minimum of a $36M pre-

investment valuation for 30% of the Company.

US$250,000 in fees & expenses and 15% of the stock will go topay for Public Shell, Merchant Banking, Investor Relations, Legaland Accounting services.


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Shareholder Structure Post Merger

The following is an example of a capital structure

Based upon a total of 10 million shares outstanding immediately after the merger betweenyour Company & the Shell Company. The initial target trading price is anticipated to beapproximately US$3.50 per share.

Shell Company Shareholders: 0.45 million shares

Your Company: 8.5 million shares Advisory Interests: 1.05 million shares

Its anticipated that an additional 5 million shares would be issued in the private placementfor raising US$15 million less fees and expenses associated with the underwriting. These feesare typically 7 - 10 percent plus underwriters warrants of the amount raised.


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Raising Capital with Direct Investors

Raising capital through a PIPE (Private Investment in a Public Equity)based on the following issues:

Market Capitalization

Share Price

Liquidity

Float

Our Investor Relations program will stimulate demand and drive themarket capitalization and liquidity of your Company

We can expect to raise approximately 10% - 15% of the market

capitalization of the company during the first round of financing


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US Exchanges and Markets
http://www.nasdaq.com/


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AMEX Listing Requirements for US Companies

Shareholders' Equity $4 million Shareholders' Equity $4 millionPre-tax income $750,000 in last fiscal year or in 2 of its last 3 fiscal years History of Operations 2 yearsDistribution 800 public shareholders and 500,000 publicly held Distribution 800 public shareholders and 500,000 publicly held

or or

400 public shareholder and 1 million shares publicly held 400 public shareholder and 1 million shares publicly heldor or

400 public shareholders, 500,000 shares publicly held andaverage daily trading volume of 2,000 shares for prior 6

months


months

Price $3 per share Price $3 per shareMarket Value of Public Float $3 million Market Value of Public Float $15 million

Shareholders' Equity $4 million

Total market Capitalization $50 millionDistribution 800 public shareholders and 500,000 publicly held

or

400 public shareholder and 1 million shares publicly heldor


monthsMarket Value of Public Float $15 million

Standard 3

Standard 1 Standard 2

Note: Companies must also comply with other listing requirements

such as having a majority (50% for SB filers) of independent directors,

independent audit committee, and others.


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AMEX Listing Requirements for International Companies

Pre-Tax Income $750,000 latest fiscal year Pre-Tax Income N/Aor

2 of most recent 3 fiscal years

Market Value of Public Float $3 million Market Value of Public Float $15 millionShare Price $3 Share Price $3Operating History N/A Operating History 2 YearsStockholders' Equity $4 million Stockholders' Equity $4 million

Public Float 500,000 Public Float 1 millionPublic Shareholders 800 Public Shareholders 400Average Daily Volume N/A Average Daily Volume N/A

Public Float 500,000 Public Float 1 million (worldwide)Public Shareholders 400 Public Shareholders 800 (worldwide)Average Daily Volume 2,000 Average Daily Volume N/A

Alternative 3 Alternative 4

Regular Financial Guidelines Alternate Financial Guidelines

Alternative 1 Alternative 2

Distribution Guidelines


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AMEX Listing Process

Notes:1) Company must comply with all listing guidelines.

2) Companys application is approved by AMEXListing Department

The Company files an original listingapplication and supporting documentationwith the exchange and pays a $1,000non-refundable fee

The Companys original listing applicationand supporting documentation are reviewed

by Amex Listing Qualifications staff toensure adherence to Exchange Listingguidelines

If necessary, the Company files anExchange Act Registration Statementand exhibits with the SEC

The Exchange reserves a Ticker The SEC Orders the Exchangesymbol and approves listing Act Registration Statement Effective

The Company selects a Specialist

Security is admitted to dealings

Step 1

Step 2

Step 3

Step 4

The Company files an original listingapplication and supporting documentationwith the exchange and pays a $1,000non-refundable fee

The Companys original listing applicationand supporting documentation are reviewed

by Amex Listing Qualifications staff toensure adherence to Exchange Listingguidelines

If necessary, the Company files anExchange Act Registration Statementand exhibits with the SEC

The Exchange reserves a Ticker The SEC Orders the Exchangesymbol and approves listing Act Registration Statement Effective

The Company selects a Specialist

Security is admitted to dealings

Step 1

Step 2

Step 3

Step 4


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Nasdaq National Market Listing Requirements

Requirements

Standard 1

Marketplace Rule

4420 (a)

Standard 2

Marketplace Rule

4420 (b)

Standard 3

Marketplace Rule

4420 (c)

Standard 1

Marketplace Rule

4450 (a)

Standard 2

Marketplace Rule

4450 (b)

Stockholders' equity $15 million $30 million N/A $10 million N/A

Market Value of listed

securities N/A N/A $75 million N/A $50 million

or or or

Total Assets $75 million $50 million

and and and

Total Revenue $75 million $50 million

Income fromcontinuing operationsbefore income taxes(in latest fiscal year or

2 of last 3 years)

$1 million N/A N/A N/A N/A

Publicly held shares 1.1 million 1.1 million 1.1 million 750,000 1.1 million

Market value ofpublicly held shares $8 million $18 million $20 million $5 million $15 million

Minimum bid price $5 $5 $5 $1 $1Shareholders (roundlot holders)

400 400 400 400 400

Market makers 3 3 4 2 4Operating History N/A 2 years N/A N/A N/ACorporate

governance

Yes Yes Yes Yes Yes

Initial Listing Continued Listing


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Nasdaq SMALLCAP Market Listing Requirements

Companies must meet minimum initial and continued financialrequirements

Requirements Initial Listing Continued Listing

Stockholders' equity or $15 million or $2.5 million or

Market Value of listed securities or $50 million or $35 million or Net Income from continuing operations (inlatest fiscal year or 2 of the last 3 fiscalyears)

$750,000 $500,000

Publicly held shares 1 million 500,000

Market value of publicly held shares $5 million $1 millionMinimum bid price $4 $1Shareholders (round lot holders) 300 300Market makers 3 2Operating history or 1 year or N/AMarket Value of listed securities or $50 millionCorporate governance Yes Yes


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AXM A Recent RTO Experience


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Can You Picture Yourself ?

AXM Pharmas Inc., Chairperson,

Madam Wang Wei Shi, rings the opening bell

At the American Stock Exchange (AMEX)

27 April 2004.


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AXM Pharma Experience

Pharmaceutical company based in the Shenyang, PRC

Wholly-owned subsidiary Shenyang Tianwei Werke Pharmaceuticals,Co. Ltd.

OTC and prescription pharmaceutical products

Currently trading on American Stock Exchange under symbol AXJ

Recent traded as high as $7.50 per share Average daily volume of 110,000


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2003- 2004 Highlights

Record sales of US$10.4 million Operating income of US$2.25 million

Initial listing on Companys Stock

Raised US$8.0 million

Groundbreaking of new US cGMP manufacturing plant

In-licensing of Sunkist brand of vitamin & supplement products

Expanding sales into three new markets

Gained senior listing on Amex

Attracted experience senior management


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AXM Pharma Trading History


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Contact Information

Mr. Douglas C. MacLellanCEOThe MacLellan Group, Inc.8324 Delgany AvenuePlaya del Rey, California 90293e-mail: [email protected]: 310-301-7728fax: 310-301-7748US cel: 310-283-4201

China cel: 011-861-369-121-3337

Mr. Joseph T. CunninghamPresidentAmaroq Capital, LLC18 Pheasant LaneNorth Oaks, Minnesota 55127 SAe-mail: [email protected]: 651-204-2048tel 2: 651-490-0038cel: 612-306-0527
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

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